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Business Combinations and Goodwill
6 Months Ended
Jun. 30, 2024
Business Combination and Asset Acquisition [Abstract]  
Business Combinations and Goodwill
3.
Business Combinations and Goodwill

Advanced Health Management Systems, L.P. (“AHMS”)

On March 31, 2024, the Company, through its wholly owned subsidiary, purchased all of the outstanding general and limited partnership interests of AHMS. AHMS's wholly owned subsidiary operates a Restricted Knox-Keene licensed health plan in Los Angeles, California. At June 30, 2024, total consideration for the acquisition was $63.9 million. The consideration is subject to change based on working capital adjustments.

Prime Community Care of Central Valley, Inc. (“PCCCV”)

On March 29, 2024, the Company, through its consolidated VIE, acquired certain assets of PCCCV, a professional medical corporation that operates in Central California. Total consideration of the acquisition was approximately $10.5 million, consisting of cash funded upon the close date and contingent considerations fair valued at $2.5 million on March 29, 2024 (“PCCCV

contingent considerations”). Refer to Note 19 - “Fair Value Measurements of Financial Instruments” for additional information on contingent considerations.

Community Family Care Medical Group IPA, Inc. (“CFC”)

On January 31, 2024, the Company, through its consolidated VIE, acquired certain assets of CFC. CFC is an RBO that manages the healthcare of members in the Los Angeles, California area. The group serves patients across Medicare, Medicaid, and Commercial payers. At June 30, 2024, the total consideration for the purchase was $121.0 million, consisting of $91.0 million cash funded upon the close date, $22.0 million of the Company’s common stock, resulting in the issuance of 631,712 shares of common stock, and contingent considerations fair valued at $8.0 million on January 31, 2024 (“CFC contingent considerations”). The consideration is subject to change based on working capital adjustments. Refer to Note 19 - “Fair Value Measurements of Financial Instruments” for additional information on contingent considerations.

Advanced Diagnostic and Surgical Center, Inc. (“ADSC”)

On January 1, 2024, the Company acquired 95% of the equity interest of ADSC. ADSC is a diagnostic and surgical center that also provides ambulatory surgery services. The total consideration consisted of cash funded upon close of the transaction and contingent considerations fair valued at $3.6 million on January 1, 2024 (“ADSC contingent considerations”) and is subject to change based on working capital adjustments. Refer to Note 19 - “Fair Value Measurements of Financial Instruments” for additional information on contingent considerations.

The Company is still in the process of finalizing the purchase price allocation for these acquisitions, and therefore, the balances are subject to change as a result of any working capital or fair value adjustments. The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed related to each acquisition at the acquisition date (in thousands):

 

 

CFC

 

 

AHMS

 

 

Others *

 

 

Net Total

 

Total purchase consideration:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid

 

$

90,998

 

 

$

63,935

 

 

$

12,500

 

 

$

167,433

 

Contingent consideration

 

 

8,026

 

 

 

 

 

 

6,161

 

 

 

14,187

 

Common stock issued

 

 

21,952

 

 

 

 

 

 

 

 

 

21,952

 

 

 

$

120,976

 

 

$

63,935

 

 

$

18,661

 

 

$

203,572

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,083

 

 

$

33,950

 

 

$

3,515

 

 

$

52,548

 

Investment in marketable securities

 

 

 

 

 

 

 

 

30

 

 

 

30

 

Receivables

 

 

6,530

 

 

 

11,007

 

 

 

 

 

 

17,537

 

Other Receivables

 

 

472

 

 

 

 

 

 

 

 

 

472

 

Prepaid expenses and other current assets

 

 

 

 

 

36

 

 

 

11

 

 

 

47

 

Amount due from affiliates

 

 

2,902

 

 

 

 

 

 

 

 

 

2,902

 

Land, property and equipment

 

 

 

 

 

 

 

 

823

 

 

 

823

 

Intangible assets

 

 

28,200

 

 

 

23,800

 

 

 

3,900

 

 

 

55,900

 

Goodwill

 

 

85,208

 

 

 

31,811

 

 

 

11,121

 

 

 

128,140

 

Income tax receivable

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Restricted cash

 

 

 

 

 

300

 

 

 

 

 

 

300

 

Total identifiable assets acquired

 

$

138,395

 

 

$

100,904

 

 

$

19,401

 

 

$

258,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

1,641

 

 

$

7,111

 

 

$

250

 

 

$

9,002

 

Medical liabilities

 

 

15,754

 

 

 

15,849

 

 

 

 

 

 

31,603

 

Amount due from affiliates

 

 

 

 

 

5,890

 

 

 

54

 

 

 

5,944

 

Income taxes payable

 

 

24

 

 

 

1,689

 

 

 

 

 

 

1,713

 

Deferred tax liability

 

 

 

 

 

6,430

 

 

 

8

 

 

 

6,438

 

Noncontrolling interest

 

 

 

 

 

 

 

 

428

 

 

 

428

 

Total identified liabilities assumed

 

$

17,419

 

 

$

36,969

 

 

$

740

 

 

$

55,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net identifiable assets acquired

 

$

120,976

 

 

$

63,935

 

 

$

18,661

 

 

$

203,572

 

 

* Others consist of estimated fair values of the assets acquired, net of cash acquired, related to ADSC and PCCCV.

Following the acquisition dates, the operating results have been included in our condensed consolidated financial statements. For the period from the acquisition dates through June 30, 2024, the total revenue and net income of CFC, AHMS, ADSC and PCCCV, in aggregate, were $132.7 million and $11.4 million, respectively.

Unaudited Pro Forma Financial Information

The pro forma financial information in the table below presents the combined results of the Company and CFC, AHMS, ADSC and PCCCV as if the acquisitions had occurred on January 1, 2023. The pro forma information presented is shown for illustrative purposes only and is not necessarily indicative of future results of operations of the Company or results of operations of the Company that would have actually occurred had the transactions been in effect for the periods presented.

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands, except per share amounts)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Total revenue

 

$

486,265

 

 

$

395,006

 

 

$

955,068

 

 

$

777,468

 

Net income attributable to Astrana Health, Inc.

 

$

19,171

 

 

$

18,337

 

 

$

37,641

 

 

$

38,660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share – basic

 

$

0.40

 

 

$

0.39

 

 

$

0.79

 

 

$

0.83

 

Net income per share – diluted

 

$

0.40

 

 

$

0.39

 

 

$

0.79

 

 

$

0.83

 

 

The acquisitions were accounted for under the acquisition method of accounting. The fair value of the consideration for the acquired companies was allocated to acquired tangible and intangible assets and liabilities based upon their fair values. The excess

of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. Factors leading to goodwill being recognized are the Company’s expectation of synergies from combining operations of entities acquired and the Company, as well as the value of intangible assets that are not separately recognized, such as assembled workforce. The determination of the fair value of assets and liabilities acquired requires the Company to make estimates and use valuation techniques when market value is not readily available. Transaction costs associated with business acquisitions are expensed as they are incurred.

At the time of acquisition, the Company estimates the amount of the identifiable intangible assets based on a valuation and the facts and circumstances available at the time. The Company determines the final value of the identifiable intangible assets as soon as information is available, but not more than one year from the date of acquisition.

Goodwill is not deductible for tax purposes. The Company had no impairment of its goodwill or indefinite-lived intangible assets during the three and six months ended June 30, 2024 and 2023.

The change in the carrying value of goodwill for the six months ended June 30, 2024 was as follows (in thousands):

 

 

Amount

 

Balance, January 1, 2024

 

$

278,831

 

Acquisitions

 

 

128,140

 

Adjustments

 

 

2,610

 

Balance, June 30, 2024

 

$

409,581